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Adidas To Sell Robot-Made Shoes In Germany (dw.com)
Adidas, the German sportswear and equipment maker, has announced that it will start marketing the first series of sports shoes manufactured by robots in Germany from 2017. Deutsche Welle reports: The announcement came as Adidas unveiled its prototype "Speedfactory", a state-of-the-art, 4,600 square-meter facility meant to automate shoe production, which is largely done manually in Asian factories at the moment. The company has struggled with steadily rising wages across the continent, where it employs around a million people. Still, Adidas insisted that the aim was not to immediately replace their workers, saying the goal was not "full automatization".
According to press coverage in Germany the main advantage (apart from not having to pay human workers) they are after is not so much storage and transport cost (they are pretty cheap these days), but eliminating the time it takes to ship products from China to the countries where they are sold. "Fashions" seem to come and go within months these days, and a shipment taking a month can make a difference, then.
Adidas's GROSS profits are increasing. "Gross Profit" is total revenue--sales. Outside of the financial industry, "Gross Profit" is a weasel-word used to mislead people: we usually think of "profit" as "net profit," which is the gross profit minus operating expenses. This makes sense because operating expenses include wages (employee gross profits--net is minus taxes), supply line (other business's gross profits), and outsourced business services (again, other business's gross profits). If you put all business net profits together with all employee gross income, you get the total income.
Gross profits increase if your employee wages get more expensive and you thus adjust the price of your product. Your net profit can actually decrease under this situation, leaving your business with less money at the end of the year.
As for this:
I would love to know why Adidas can't afford to pay decent wages?
Businesses don't pay wages. Consumers pay wages.
Wages in aggregate across the entire production process are the base cost: at the end of the day, the product will absolutely sell for no less expensive than that. Volume deals push the price closer to the cost, such as when GM tries to bid for 100,000,000 tonnes of steel per year, and the steel mills contract with the coal and ore companies contingent on winning the GM contract, and everyone slims their profit margin because taking $1 per tonne on 100,000,000 tonnes is still $100,000,000 versus trying to profit $20 per tonne and selling 0 tonnes to GM. No matter how hard you compact that down--get it down to tenths of a cent per unit and 0.1% profit margins--you'll get no lower than the wage-labor costs of all employees involved in the entire supply chain.
Raise the wage-labor cost such that the steel costs $20 more per tonne and the price the steel mill will need to charge goes up by $20. With GM making passenger cars weighing 1.5 tonnes in steel, those cars cost $30 more. Either GM absorbs the cost in the form of lower profit margins (in which case, GM, as the consumer of steel, pays the wage of the steel mill) or GM holds its profit margin (usually 7%-13%; was -7.5% in 2013--they took a loss, which the big profit margins help protect against) and the end consumer pays for the wage raise.
In the case of Adidas, when shoe-maker labor increases, they can either raise prices or lower profits. Adidas's profits barely offset their loss years, with a five-year average of 4% and a five-year low of -7.5%. That means a 4% increase in labor costs--29 cents in minimum-wage increase in the United States, or a 14 cents increase on $3.50/hr Chinese labor--can put Adidas into permanent loss, ending in bankruptcy.
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